Energy Prospectus

Working gas in storage was 3,125 Bcf as of Friday, August 18, 2017, according to EIA estimates. This represents a net increase of 43 Bcf from the previous week. Stocks were 223 Bcf less than last year at this time and 45 Bcf above the five-year average of 3,080 Bcf. At 3,125 Bcf, total working gas is within the five-year historical range.

For those of you that think natural gas demand is all about the weather; during the last seven weeks (July and three weeks of August) the delta to the 5-year average has declined by 138 Bcf. So, during a rather mild summer, the delta has declined by an average of 2.8 Bcf per day (138 / 49 days). That is actually faster that I thought it would decline at the beginning of April. I thought it would decline 2.0 to 2.5 Bcf.

When you include exports, we now consume a lot more gas than we did five years ago. More than 10 Bcfpd and exports have really ramped up this year and they will keep ramping up.

My prediction of storage falling below the 5-year average during September now looks very good.

Hurricane Harvey will impact gas supply for the next two storage reports. In addition to many production platforms being shut in, lots of South Texas onshore production may be impacted. Flooding causes operators to shut in wells. When I was at Hess we had several entire tank batteries float away in Louisiana during a hurricane. Plus, there are a lot of refineries and petrochemical plants in the direct path of this storm that is now a Cat 3. BTW I live in Sugar Land and we are going to be impacted by the heavy rain. We are expected to get over a foot of rain this weekend. Our home is not in danger, but I am worried about a lengthy period without electricity.

Since March 10, the delta to the 5-year average has declined by 366 BCF. That is 23 weeks. (2.273 Bcfpd)

There are ~12 weeks before the next winter heating season begins. The 5-year average for mid-November is 3,877 Bcf.

I predict the next winter will begin with gas in storage ~100 Bcf below the five year average.

For the record, this is not a prediction that natural gas prices will spike to $8.00/mcf like they did during the winter of 2013/2014. That winter heating season began with storage about where I expect it to be this November. However, that winter also started with a very cold December.

I do think a normal winter will push natural gas prices to $4.00 or above if we get a cold December. They will not stay high for long unless we get a very cold winter. We have lots of natural gas reserves in the ground, but today we have a shortage of "deliverable gas". Almost the entire shortage is because of less gas coming from the Eagle Ford.